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Many Hispanics living in the United States find it difficult to obtain bank credit. If you apply for a loan from a bank, it is possible that you will be rejected because:
- You do not have any credit history in the US yet
- You’ve faced financial hardship in the past and your credit has suffered
If you dream of buying a house, a car, or starting your own business, these goals will be difficult and costly to establish and maintain without strong credit. Because it takes time and is good financial practice, many Hispanics get immediate help from a loan shark.
What is loan shark?
When you look for money, you may hear from people you know: “I know this person who borrows money and doesn’t even ask for it”. This person who “borrows the money” may be a friend of a friend, someone who is a friend of the family, or may be found at a store in your neighborhood. There are many disadvantages to using the services of moneylenders, even though many claim to be legitimate moneylenders.
- They charge a weekly interest rate – what is the real cost of the moneylender’s loan? The lender will give you a weekly interest rate instead of an annual one. Remember that bank loans and other financial institutions always use annual interest. Let’s look at a specific case: The lender lends you $1,000 and you agree to pay 5% weekly interest on this amount. 5% each week translates to roughly 20% each month, and if you multiply this by 12 months in a year, you get an annual interest rate of 260%!
- Payments are confusing – Weekly interest rates that don’t seem high can translate to interest 10, 20 and 30 times more than what you’d pay in a traditional loan agreement.
- Loans are hard to pay off – in fact, they are designed to be nearly impossible to repay. Many people who have taken loans from these lenders end up losing more than they originally invested. If you are unable to make payments, the lender may continue to harass you or even threaten you with violence. Many people who borrow money from moneylenders lose their business.
- They don’t report to the credit bureaus – Loan sharks sometimes don’t report their loans to the credit bureaus. To establish, protect and maintain your credit history, you must ensure that your creditors actually report their debts to the credit agencies. If they don’t, there is no official record of your loan payment.
- They don’t work within the rules – If you have a complaint, you have nowhere to go because loan sharks don’t have to follow the rules to protect you as a consumer.
In general, it is better to avoid these types of lenders at all costs. If you need money for your business or for an emergency and you don’t have access to a bank loan, try taking out a loan with ACCION, a non-profit organization that makes business and personal loans and Reports to the three main credit bureaus. ,
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